Why do professional athletes need life insurance?
If you are a professional athlete thinking about life insurance, you are doing it for one reason; you want to help someone you love to avoid a financial hardship if you die. A lot of people think that because pro athletes make a lot of money, they do not need life insurance. Not true. If you are a pro athlete, and you die prematurely, your cash flow to your heirs will not be the same as if you were playing. Depending on the sport, most players get paid weekly or bi-weekly and only during the season. There are exceptions with arrangements like signing bonuses, deferred compensation, and loans. Not all contracts are guaranteed, plus some contracts have performance standards. Life insurance will help your family through a very difficult time and help them avoid financial hardship. So, you would probably agree, life insurance is a very important part of a professional athlete’s financial plan.
If you are like most athletes that make it to the pros, you are probably still young and have a lot of years ahead of you. You have spent a lot of your life improving your athletic skills, and you possibly have not taken a lot of time to plan your finances. Don’t worry; you are a lot like other athletes. But time stands still for no one, and there is no time like the present to start looking out for your family.
To make it to the pros you put in a lot of hard work. Through all your trials and tryouts, who has loved you the most and who do you love the most? It is perhaps your mom, or dad, or both. Karl Joseph, a rookie with the Oakland Raiders, is a perfect example of how a young professional athlete showed his love for his mom. He bought her a house.
As you mature as an athlete, your emotional life changes too. At some point, you may have a spouse and children of your own that you love and want to provide for them financially as well. That is why the need for life insurance changes for professional athletes over time. Properly structured life insurance purchased as a rookie will help you no matter how your career turns out. If a rookie professional athlete is fortunate enough to have a long and profitable career, having life insurance can provide liquid assets if they die. Plus, life insurance purchased as a rookie can be used as a financial tool that can provide money during their lifetime. If you start out with term life insurance, it is possible to exchange that policy for one that is permanent. The policy cash value is legally protected from creditor claims and saves taxes while accumulating value too. However, those are possibilities for later. If a rookie’s career does not turn out as hoped, life insurance can still provide a very affordable life insurance benefit for many years to come.
Having flexibility with the cost of life insurance is very important throughout the career of a professional athlete. What fits into a pro athlete’s budget now might not fit when his career is over. Life insurance coverage can be designed to protect what needs to be protected in the beginning and leave room to make changes without losing money.
To better understand why professional athletes need life insurance it is useful to look at how long their career might last. Let’s break it down into a few simple categories; rookies, midterm athletes and seasoned athletes. With each stage of their career, the circle of people that an athlete cares for may expand and change.
If you are at the rookie professional athlete stage of your life, sooner than later, you need to make financial decisions. The first year that a professional athlete makes it to the highest level of their sport is when they are making a high income. Some may be making seven figures, or at least six figures of income.
2017 MLB players’ minimum salary will be $535,000 (MLB, 2016, December 4),
2017 NFL players’ minimum salary will be $465,000 (Sportrac, & Ginnitti, 2016, January 11)
2015, NBA players’ minimum salary is $507,336 (Sheridan Hoops, & Bernucca, 2014, July 10)
2012 NHL players’ minimum salary was $525,000 (NHL, 2005, August 1).
As you formulate a plan, consider this fact. A player’s Rookie year is the best year to buy life insurance. Life insurance is cheap, and you are in the best health of your life. You will develop as an athlete, however from a life insurance standpoint; you are at the best point. If you wait until you are older, married and have children, there are lots of factors that could increase the cost, or it is possible that you may not be insurable. We’ll look at some of the problems that may make an athlete uninsurable in a moment.
Let’s go back to the point of why you should consider life insurance; to provide for the people in your life that you love. And by using a strategy that I have developed called an insurance ladder, it is inexpensive too. An insurance ladder is a strategy of how an athlete can get the most for his money and change how it is structured too.
The Life Insurance Ladder
Based on the income and the high probability that family situations may change, professional athletes just starting out should consider at least $5,000,000 to $8,000,000 of life insurance coverage. By using and insurance ladder strategy, an athlete would have coverage for thirty years, and as their net worth increases, the life insurance would decrease and so would the cost. The insurance ladder would also give the athlete the opportunity to keep the life insurance at higher levels if their income increases. As an example, for a twenty-year-old in good health, $6,000,000 in life insurance coverage would cost only about $2,400 a year.
Invincible or well trained?
Let’s look at what may make an athlete considered uninsurable by a life insurance company. Any athlete that has made it to the professional level knows that they are not invincible. Every player has suffered some injury, and they can see the older an athlete gets, the more vulnerable they are to injury. If an athlete becomes injured, that injury may affect their ability to qualify for life insurance too.
Professional sports do have their inherent critical injuries which emphasize the need for young athletes to have life insurance. An extensive study done by the American Heart Association revealed that between 1980 and 2006 that 1,866 young athletes between the ages of nineteen and twenty-five suddenly died during competition (Maron, Doerer, Haas, Tierney, & Mueller, 2009).
Paramed – the life insurance tryout
If you have made the decision to buy a certain level of life insurance, now you must show the life insurance company that you are a good risk. It is like your first pro combine or tryout. You want to show your best. In the case of life insurance, you want to show your best health so that you get the life insurance plan you want at the price you first discussed with your life insurance agent. Here are guidelines that I have followed in the past to help clients successfully get the life insurance they want at the price they expect.
Answer applications questions completely
Provided complete personal financial information
Provide a copy of employment and endorsement contracts
Supply all medical information
Submit to the requested health exam
Work with your life insurance agent to put together a cover letter
The cover letter is one of the most important services that a life insurance agent can provide. Athletes’ life insurance applications are rarely simple and routine. Giving specific health, income, and lifestyle information cannot be communicated very well through a standard life insurance application. That is why the life insurance agent should write a detailed cover letter to methodically go through every circumstance that may affect a life insurance company’s decision to offer life insurance. Keep in mind that it is so much easier to help the life insurance company form an opinion of an athlete’s health than to change an opinion formed by outside factors. Openly reveal any news coverage that may adversely affect the life insurance company’s opinion of the risk they are taking by offering a life insurance policy to a pro athlete. Be sure to emphasize any positive aspects of the athlete’s community involvement if available or anything else that would show them in a positive light.
Hopefully, this information will help you in communicating your application for life insurance. The more clearly you communicate the information concerning your health, the more likely you are to obtain a favorable health rating and a lower cost. If I can help you with questions, please feel free to call, email or text. I will remind you that this article is not intended to communicate medical health recommendations. My principal goal is to help you better communicate your health to a life insurance company in hopes of getting the favorable life insurance you want.
By Van Richards
Van is the founder of Advice4LifeInsurance and Advice4Retirement. You can contact him at van@advice4lifeinsurance.com Follow on Twitter @VanRichards or Facebook at https://www.facebook.com/advice4lifeinsurance/ and https://www.facebook.com/Advice4Retirement/
References
Joseph, K. [k_8joseph]. (2017, January 18) Raider rookie buys house for mom [Instagram] Retrieved from: https://www.instagram.com/p/BPWTsU4D2B9/
Major League Baseball. (2016, December 4). Details of MLB, MLBPA labor agreement. Retrieved January 24, 2017, from http://m.mlb.com/news/article/210125462/details-of-mlb-mlbpa-labor-agreement/
Maron, B. J., Doerer, J. J., Haas, T. S., Tierney, D. M., & Mueller, F. O. (2009). Sudden Deaths in Young Competitive Athletes: Analysis of 1866 Deaths in the United States, 1980-2006. Circulation, 119(8), 1085-1092. doi:10.1161/circulationaha.108.804617
National Hockey League. (2005, August 1). Collective Bargaining Agreement FAQs. Retrieved January 24, 2017, from http://www.nhl.com/ice/page.htm?id=26366
Sazedides, F., 2016, July 21, Off Season, Retrieved from https://unsplash.com/@sazeides
Sheradan Hoops, & Bernucca, C. (2014, July 10). 2014-15 NBA salary cap computations. Retrieved January 24, 2017, from http://www.sheridanhoops.com/2014/07/10/2014-15-nba-salary-cap-computations/
Sportrac, & Ginnitti, M. (2016, January 11). NFL minimum salaries for 2016 and the veteran cap benefit rule. Retrieved January 24, 2017, from https://www.spotrac.com/blog/nfl-minimum-salaries-for-2016-and-the-veteran-cap-benefit-rule/
Trysh, K., Muscles, 2016 November 27 Retrieved from https://unsplash.com/@tryshphoto
コメント